Manufacturing bosses 'making up' for recession pay freezes

The pay gap between the manufacturing and services sectors has continued to
widen with salary rises in the “soft” part of the economy falling further
behind.

The median pay award in the manufacturing sector was the same as for the three months to the end of JulyPhoto: Alamy

By Alan Tovey

6:00AM BST 19 Sep 2013

New research from Incomes Data Services (IDS) found that in the three months to the end of August, the median pay award in the industrial and production areas was 2.5pc, compared with 2pc in the dominant services sector, which represents about three-quarters of Britain’s economy.

For manufacturing, the latest figure was the same as for the three months to the end of July, while in services it represents a decline from the 2.3pc rise seen in the previous report.

Ken Mulkearn, head of pay and research at IDS, cautioned that while the summer was a “quiet” time, the differential might be seen as a reward for manufacturing staff making wage sacrifices during the recession.

“Manufacturing has been doing better economically but during the depths of the crisis it saw its fair share of pay freezes traded against protection of jobs,” he said. “We could be seeing an element of gratitude to make up.”

Mr Mulkearn said he was also seeing indications the trend could continue. “It’s difficult to predict the future. However, while data show firms have not been adding jobs – which is a lagging indicator – they are telling us they are seeing a labour market that is 'unslackening’ – it’s still certainly not tight,” he said.

“Companies are concerned about recruitment, and retention of technical roles, engineers, procurement and buying keep getting mentioned as hard to recruit. The traditional way to recruit and retain is to boost pay, so we might be seeing some movement.”

Some 60pc of wage increases in manufacturing came in at 3pc or higher, with higher-end awards recorded in chemical manufacturing and aerospace and defence. IDS suggested this could be linked to these sectors enjoying an upturn as the economy recovers.

Across the whole economy the median pay increase awarded in the quarter to August was 2.5pc. In the year to date there have been far fewer pay freezes than compared with last year. So far in 2013, 8pc of all awards saw staff have their pay held at the same level, compared with 12pc having a freeze imposed last year.